Answers to your insurance questions

Definition
You have probably seen this term on an automobile insurance policy or you have heard talk of changing your deductibles. What is a deductible? The deductible is the amount payable by you, the insured, as a part of the total insurance claim.

For example, a car damaged in a collision might have a $500 deductible. If your damage is less then the $500 then you would pay this out of your own pocket. Any amounts over that, would have $500 deductible taken off any claim payment. A $750 claim would be paid $500 by the insured and $250 by the insurance company.

Usually the repair shop wants you to pay your deductible before starting any repairs. This can cause a problem for someone who is a bit cash-short. Once an agreement has been reached about the repairs to be done and the repair shop has advised the insurance company that they are ready to proceed you will have to return any rental vehicle paid for by the insuirer.

If your repairs are not much over the deductible and your accident has only involved your vehicle then you might not be willing to submit a claim. You may choose to do the repairs and keep your driving record clean if that is acceptable to the insurance underwriter. Usually no payout results in no marks on the record.

If your accident involved another vehicle and there is a public liability and property damage (PLPD) claim then your record will be affected. At this point you need to weight whether or not you absorb the cost of the repairs to your vehicle. This needs to be discussed with your broker or agent.

Do you always pay a deductible?
Some insurance companies now offer a disappearing deductible. If you do not have a claim for a certain number of years, then each year you will see the deductible decrease. Eventually it disappears. Of course, when you do have a claim, it comes back on your renewal or replacement if it is a total loss.

Fire, lightning and theft resulting in the loss of the entire vehicle can result in a zero deductible.

Raise your deductible = save money. Is this true?
A deductible can be a tool to help reduce your insurance costs. Many property insurers will give 15-20% discount up to the first $200 if you increase the usual $500 deductible to $1000. Be aware though that if there is a claim then you will pay $1000 instead of the $500. Again, this is not something you immediately request. Consider the actual savings and the actual cost of the higher deductible if you have a claim.

If your vehicle has a lease or lien then you might have a limitation on the amount of your deductible. At this time it is common to see a requirement that deductibles for collision and comprehensive not exceed $1000.

Deductible as a tool?
Collision coverage is a tool to bring in the expertise of the insurance company in handling a third party claim. A third party claim is when someone else has injured you or your property. In the case of automobile insurance, if you do not carry collision coverage then the insurer has no duty to defend. This means you are on your own dealing with the at fault driver's insurance company. One way to give you that defense, is to carry a large deductible on that vehicle.

Insurance answer
Consider your risk. What you cannot control, you might choose to manage with insurance. The insurance you choose, should suit your financial position for deductibles.